Nigeria’s public debt stood at N31.01trn as at June 2020
The plan by the World Bank and the International Monetary Fund (IMF) to reduce Nigeria’s and other International Development Association (IDA) countries’ debts has been lauded by analysts at Cowry Asset Management Ltd. They said the move would bring relief to Africa’s largest economy, especially with respect to debt servicing costs.
The analysts stated this in the latest “Cowry Weekly Financial Markets Review & Outlook (CWR),” report obtained by New Telegraph yesterday. The analysts said: “The planned debt reduction by the Bretton Woods institutions (World Bank and IMF) would provide Nigeria succour, particularly in the area of debt servicing which has negatively impacted Nigeria’s distributable income.”
Last week, the President of the World Bank Group, Mr. David Malpass, told a virtual media briefing at the ongoing Annual Meetings of the IMF/World Bank in Washington, that he was in talks with the Managing Director of the IMF, Ms. Kristalina Georgieva, on how to provide debt reduction and assistance to Nigeria and other International Development Association (IDA) countries that had been severely impacted by COVID-19.
According to him, the plan is to ensure that the pandemic doesn’t plunge the IDAs into a debt crisis. The World Bank president said: “The tendency in past debt crises is for countries in debt distress to go through a series of ineffective debt rescheduling that leaves them weaker.
“Creditors may eventually allow them to get to a debt reduction process, but at a tremendous cost to the poor. We need to work better and faster this time. “While there’s been G20 discussion of a common framework on debt treatment, it’s important that it not just kick the can. Given the urgency of the debt crisis, the IMF and World Bank have proposed that we undertake a joint action plan on debt reduction for the most indebted IDA countries.
“We’ll discuss it this week with governors during our annual meetings. It’s urgent to make rapid progress on a framework because the risk of disorderly defaults is rising. “The scale of the challenges ahead is staggering; so, we need to do more. With the strong support of its shareholders, IDA has frontloaded IDA-19 resources to the fullest possible extent as a key part of the surge in our commitments this fiscal year.
“However, IDA lending would have to decline in the next two years even though the latest forecasts, including those just announced by the IMF, suggest that the reduction in economic activity will extend well into subsequent years. We are proposing to IDA Deputies later this month a $25 billion supplemental COVID Emergency Financing Package. We’ll be grateful, as always, for your support.”
There has been growing concern over Nigeria’s rising debt profile in recent years, especially the country’s elevated debt servicing costs. The latest public debt report released by the Debt Management Office (DMO) shows that Nigeria’s total debt stock (foreign and domestic), as at June 2020 stood at N31.01 trillion ($85.9 billion) compared with N28.63 trillion ($79.3 billion) recorded in March 2020.
The report also indicates that N921.9 billion was used to service domestic debts between January and June 2020, while N288.6 billion ($759.6 million) was used on foreign debts, making a total of N1.21 trillion. This means that debt service increased by 14.6per cent when compared to N1.06 trillion spent in the same period of 2019.